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Article:
Usury Loopholes and other Games Credit Card Companies
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Jacksonville Attorney - Lawyer,
providing experienced Consumer Protection, Family Law, Estate Law,
Employment Law, Business Law, and Bankruptcy Law legal
representation in Jacksonville, Hilliard, Duval County,
Nassau County and the surrounding Northeast Florida areas.
They say money talks and it sure does when it comes to
big business getting its way. It has been the law in
Florida for years that if you borrowed money from a loan
shark and paid higher than 18 percent interest, the loan
shark would forfeit interest. Under the criminal usury
statute, Fla. Stat. § 687.071, charging an interest rate
in excess of 25 percent or 45 percent constitutes a
second degree misdemeanor or third degree felony,
respectively. A long line of Florida court cases
starting in 1936 and continuing until recent years
dismissed efforts by creative cons to avoid the usury
statute in Florida by charging a “commission” or bonus
on top of healthy rate of interest. Of course, the
usury statute was designed to protect you, the consuming
public. I can hear you asking “Then how do the credit
card companies get away with charging you 29%
interest?”
Frankly, there are different standards for financial
institutions that are national banks or affiliate
themselves with national banks. There is an exception
to that law big enough for a Mercedes SUV (picture boss
hoggs at the wheel) to drive through thanks to a 1996
Supreme Court decision, Smiley v. Citibank, that
affirmed banks are only subject to their home state’s
laws, no matter where their consumers live. So a South
Dakota bank, for example, needs to only comply with
South Dakota’s relaxed consumer protection law rather
than Florida’s usury statute.
South Dakota Regulated lenders are exempt from almost
all limitations on the rate of interest which they may
charge. Title loan companies and others have tried to
rent-a-bank by partnering with South Dakota banks and
others to charge the interest rates that they want to in
many locales. Of course, banks desire to set up
headquarters in these safe havens and they grow at the
expense of the rest of us.
As
a result of this encouragement and thanks to the spread
of arbitration agreements prohibiting jury trials in
many consumer cases, the credit card companies were
emboldened to engage in these and many unfair
practices. And they profited handsomely. It reminds me
of the old adage taught to me by Professor Jeffrey Davis
at Florida Law School: pigs get fat, hogs get
slaughtered.
Fortunately, it appears that some of the hogs are being
herded into holding pens but not all. As of the date
this article is written, it appears that the Credit
Cardholders' Bill of Rights is going to be passed by
Congress and signed into law by President Obama. It
will end many of the unfair and arbitrary interest rate
increases, payment gimmicks, misleading advertising,
evaporating teaser rates and the like. When they saw
this coming, the big banks asked the Bush administration
to enact a rule but to delay its implementation until
July 1, 2010. Fortunately, we are not going to wait
that long. The new legislation will likely become
effective three months after it is signed into law.
Unfortunately, and possibly in anticipation of some of
these changes, many of the same financial institutions
receiving TARP money have cut credit lines, increases
rates and cancelled credit cards, even for those who
have never missed a payment and have stable incomes.
The new law will likely prohibit unfair increases in the
interest rates on card balances and retroactive
increases only if the cardholder is late. It is a lot
easier to raise rates now and to do so under the guise
of forcing cardholders to reapply for credit. Although
the new law is an improvement, there are still a lot of
loopholes to the consumer protection statutes.
Unfortunately, it does not look like anyone, even
President Obama, is going to get in the way of that
Mercedes SUV with boss hogs at the wheel.
If
you have a question for Steve Fahlgren or want him to
write about a topic, please send him an email at
stevefahlgren@gmail.com
Disclaimer: The above Article
is intended to give you, the consumer, insight into various legal topics. This
information is not intended as legal advice, but rather helpful topical
information.
 If
you require professional legal services regarding
Consumer Protection, Family Law, Estate Law,
Employment Law, Business Law, and Bankruptcy Law issues, be proactive in
protecting your legal
rights by seeking the legal advice of
an experienced
Jacksonville criminal defense attorney
& lawyer. Contact
The Law Offices of
Steven M. Fahlgren, P.A.,
by calling
904.845.2255.
Jacksonville Attorney - Lawyer,
providing experienced Consumer Protection, Family Law, Estate Law,
Employment Law, Business Law, and Bankruptcy Law legal
representation in Jacksonville, Hilliard, Duval County,
Nassau County and the surrounding Northeast Florida areas.
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